Besides enabling companies to avoid, evade and not pay tax (often legally), the secretive world of tax havens has also acted as the crucible for much of the financial innovation of the past 20 years, including the growth of hedge funds, the rise of the shadow banking system, the creation of securitised debt obligations, the increased use of "off-balance sheet" accounting, and the spread of highly-leveraged private equity financing (for more information, see "The (Crumbling) Wall of Money" and "Taking it Private").

Pressure for major tax reform will increase as the crisis deepens and widens. The International Monetary Fund (IMF) has named London as an offshore tax haven, while proposed US legislation lists British crown dependencies such as Jersey, Guernsey and the Isle of Man and overseas British territories such as the Cayman Islands, Bermuda and the British Virgin Islands as "offshore secrecy jurisdictions" that are "probable locations for US tax evasion". ("Offshore" refers not to a small island, but to capital that is controlled from outside its country of residence.)

But any actions taken against those who facilitate tax dodging and financial speculation must be accompanied by measures to protect the poorer residents of tax havens. Despite the enormous wealth located in and passing through these places, many people living there struggle to cope with the resulting high local cost of living and the lack of employment opportunities outside the finance industry. They are often affected by regressive tax policies that subsidise richer people at the expense of others.

On 12-13 March 2009, some 19 development, environment and human rights groups from Belgium, France, Italy, Ireland, Switzerland and the UK (including The Corner House) and local residents of the island of Jersey organised a seminar to discuss the necessity for reform and to exchange views on how governments and civil society can work towards achieving a "just transition" for tax havens that would not impact on poorer residents. The seminar was timed to coincide with the meeting of G-20 finance ministers in London over 14-15 March 2009 to prepare for the G-20 summit in April.

The island of Jersey (which is 14 miles/ 22.5 kilometres west of the French coast) is a prominent European tax haven and major centre of the tax avoidance industry. It is constitutionally linked to Britain, but is not part of either the United Kingdom or the European Union. It has its own Parliament, but the UK government is ultimately responsible for its governance. (For more information about Jersey's finance industry, click here; see also this background briefing on Jersey.)

The seminar was followed by a guided "walking tour" of the major banks that operate out of Jersey to avoid taxes -- ranging from Switzerland's UBS to Ireland's Allied Irish Bank, from France's BNP Paribas and Société Générale to Germany's Deutsche Bank, from the USA's Citi to Britain's Royal Bank of Scotland International and Barclays. The tour highlighted the links between secrecy jurisdictions and the current global financial crisis, and illustrated how banks are deeply engaged in promoting capital flight from poorer countries, facilitating tax evasion, supporting corrupt governments, financing ecologically harmful projects and undermining regulation.

At the end of the walking tour, a statement was read out, highlighting the increased transparency that should come with improved financial regulation and stressing the need for a global agreement covering all countries and territories equally to establish a minimum standard for international tax cooperation.